Labor has queried why the attorney general, George Brandis, is intervening in sensitive foreign policy issues such as the Middle East peace talks, with the former foreign minister Bob Carr accusing the Coalition of siding with the “religious, ethno-nationalist right of Israeli politics”.

“The description of east Jerusalem as ‘occupied east Jerusalem’ is a term freighted with pejorative implications, which is neither appropriate nor useful,” Brandis told the Senate estimates hearing. “It should not and will not be the practice of the Australian government to describe areas of negotiation in such judgmental language.”

Labor’s deputy leader and foreign affairs spokeswoman, Tanya Plibersek, expressed surprise that a policy shift of such sensitivity had been telegraphed by someone other than the prime minister, Tony Abbott, or the foreign affairs minister, Julie Bishop.

Plibersek’s spokesman said on Friday: “Who is Mr Brandis to dictate the language on the Middle East peace negotiations?”

The spokesman said the intervention this week amounted to “another foreign policy embarrassment for the Abbott government, which is why [Brandis] was forced by the foreign minister and the Foreign Affairs Department to rush out a statement about his inept pronouncements.”

Shorten remarked that “some settlement activity in the West Bank is illegal under Israeli law” when Labor’s policy was that the settlements are not in line with international law. The departure from policy was put down to a mistake by Shorten.

On Friday, Plibersek’s spokesman reiterated Labor’s policy on a two-state solution and on settlements. "We are committed to supporting an enduring and just two-state solution. Clear Department of Foreign Affairs and Trade advice to Labor in government was that the settlements are not in line with international law."

Guardian Australia has sought clarification from Julie Bishop’s office as to whether Brandis’s statement to estimates this week was reflective of government policy. At the time of publication, no clarification was forthcoming.

Bob Carr, who in his recent memoir upbraided Julia Gillard for being captured by the “pro-Israel lobby”, weighed-in on the Brandis shift on Friday.

“If Australia is saying that you can’t talk about an ‘occupied east Jerusalem’, all of that logic means that Australia is now saying you can’t talk about an occupied West Bank,” Carr told the ABC.

He suggested Australia’s foreign policy was now more pro-Israel than majority opinion in Israel, and contended the latest Australian shift would not go down well in Washington.

“The State Department would be appalled,” Carr said. “We have sided with the religious, ethno-nationalist right of Israeli politics. That means we are encouraging the hardliners – the most hardline of the hardline in Israel – to think in terms of a greater Israel, an annexation of what has been seen by the world up until now as territory occupied as a consequence of the 1967 war,” Carr said.

Peter Rogers, who was the Australian ambassador to Israel between 1994 and 1997, told the ABC on Friday that Australia’s policy on Israel now was, in essence, illogical.

“I really see absolutely no logic to it. I see no benefit for a government that still proclaims that it has an interest in a two-state solution to be supporting activities on the ground that defy the prospect of that actually happening,” Rogers said.

The government has faced a fierce domestic political backlash from Jewish groups, and well as other faith and ethnic communities, about its proposed changes to the Racial Discrimination Act, reforms that are being spearheaded by the attorney-general.

Peter Wertheim, the executive director of the Executive Council of Australian Jewry, who has been active in a broadly-based community campaign against the RDA changes, said on Friday that he saw no connection between Brandis’s statement this week on east Jerusalem and the discrimination fracas. “I don’t see any connection whatsoever,” Wertheim said.